On changing job, it is necessary to transfer the old PF to the new account. This avoids tax on interest and loss of compound interest. It also secures pension benefits by ensuring 10 years of continuous service.
New job, better salary, change in career… Amidst all this, most of the people forget the Provident Fund (PF) account of their old company. A ‘let it be, we’ll figure it out later’ attitude could be costing you millions in your retirement savings, did you know? Let us know why it is important to transfer PF money to a new account while changing jobs…
1. Interest will stop, tax will also be imposed
If no new money is deposited in your old PF account for 36 months, that account becomes ‘dormant’ (inactive). You may have to pay tax later on the interest received on the amount deposited in such inoperative account. But if you transfer the old money to the new account, it becomes part of an active account and interest keeps increasing on it without tax.
2. There will be loss of compound interest
Simply put, when a large amount is deposited in one place instead of small amounts lying in different places, the full benefit of compound interest is achieved. After 10-20 years, the benefit from the money deposited in a single account will be much higher than that from different scattered accounts.
3. Danger of pension being stopped
Your pension is as important as your PF amount. To get pension every month after retirement, minimum 10 years of service is required. If you do not transfer your PF every time you change jobs, your service period does not get recorded properly. Due to this, your 10 years will not be completed and you may lose the benefit of pension.
4. Can avoid tax burden
There is no tax on withdrawal of PF after completing five years of continuous service. But if you try to withdraw money from the old account without transferring it, and the tenure of that account is less than five years, then you may have to pay a huge amount as tax. Transferring an account adds to your total period of service.
How to transfer?
You do not need to visit offices to transfer PF. You can also do this work online:
Activate UAN: Make sure that your UAN number is active and your Aadhaar and phone number are linked to it.
Complete KYC: Update your bank account and PAN card information on the portal.
Match information: Make sure that your name and date of birth match in Aadhaar and PF records.
Online Application: You can apply for transfer by visiting unifiedportal-mem.epfindia.gov.in site and through ‘One Member – One EPF Account’ link.
If the transfer is not made even within 30 days of applying, you can file an online complaint on the ‘EPFiGMS’ portal.